Sun Limited - Annual Report 2020

25. TAXATION
Income Tax
Income tax is calculated at the rate of 0% to 33% (2019: 0% to 33%) for the Group and 17% (2019: 17%) for the Company on the profit for the period as adjusted for income tax purposes.
(a) Current tax liability
At 01 July
Translation difference (Payment)/receipt during the year Underprovision in previous year Tax deducted at source
Provision for the year
At 30 June
Analysed as follows: Current liabilities
Current tax assets (note16) At 30 June
(b) Tax charge/(Credit)
Income tax:
Provision for the year Underprovision in previous year Current income tax expense Deferred tax movement (Note 20) Income tax charge/(credit)
(c) Reconciliation of accounting profit to tax expense
Normal rate of taxation applicable to Mauritian companies
Tax effect of:
- Expenses that are not deductible in determining
taxable profit
- Underprovision in previous year
- Tax losses for which no deferred income tax
asset was recognised
- Income not subject to tax
- Transfer of assets to subsidiary company - Impairment of non-financial assets
- Impairment of financial assets
- Other adjustments
Effective rate of tax
THE GROUP
THE COMPANY
2019 Rs’000 (4,038) - 9,075 - (4,254) 5,885 6,668
6,668 - 6,668
THE COMPANY
2019 Rs’000
5,885 - 5,885 4,234 10,119
THE COMPANY
2019 %
17.00
16.05 -
-
(48.89) (1.02) - 20.43 0.24 3.81
2020
2019
2020
Rs ’000
Rs’000 22,194 (24) (30,947) 234 (4,264) 59,075
Rs ’000
46,268
6,668
(138)
-
(48,660)
(335)
267
-
(331)
(331)
2,119
-
(475)
46,268
6,002
47,379 (1,111)
9,783
6,002
(10,258)
-
(475)
46,268
6,002
THE GROUP
2020
2019
2020
Rs ’000
Rs’000
59,075 234
Rs ’000
2,119
-
267
-
2,386
59,309 142,229
-
36,005
(17,643)
38,391
201,538
(17,643)
149
THE GROUP
2020
2019
2020
%
% 17.00
(2.64) (0.01)
(8.90) (0.15) - (17.50) - 0.23
%
17.00
17.00
(7.30)
(6.41)
(0.01)
-
(8.59)
-
1.16
1.18
-
-
(1.93)
(2.44)
(0.70)
(8.99)
(1.82)
0.89
(2.19)
(11.97)
1.23
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
26. REVENUE
Revenue from contracts with customers
Rooms
Food and beverages
Others
Total revenue from contracts with customers Investment income
Total revenue
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Total revenue from contracts with customers
27. OPERATING EXPENSES
(a) Operational period(1)
- Direct costs
- Employee benefits - Other expenses
(b) Suspension of operations(1)
- Direct costs
- Employee benefits - Other expenses
Operating expenses (note 27(c))
THE GROUP
THE COMPANY
2019 Rs’000
-
-
77,436
77,436 763,500 840,936
-
77,436 77,436
THE COMPANY
2019 Rs’000
-
126,938 26,554 153,492
-
-
-
-
153,492
2020
2019
2020
Rs ’000
Rs’000
3,769,563 2,168,660 676,661
Rs ’000
2,904,980
-
1,649,338
-
503,359
175,494
5,057,677
6,614,884 -
175,494
-
99,410
5,057,677
6,614,884
274,904
2,168,660 4,446,224
1,649,338
-
3,408,339
175,494
5,057,677
6,614,884
175,494
THE GROUP
2020
2019
2020
Rs ’000
Rs’000
Rs ’000
972,078
1,417,905 2,123,949 1,927,918
-
1,631,106
83,551
1,254,583
29,884
3,857,767
5,469,772
113,435
33,888
-
-
-
-
388,598
20,200
99,173
57,061
521,659
-
77,261
4,379,426
5,469,772
190,696
150
(1) Operational period relate to period from 01 July 2019 to 31 March 2020 and suspension of operations relate to period from 01 April 2020 to 30 June 2020.
THE GROUP
THE COMPANY
2019 Rs’000
-
118,056 1,839 6,217 826 126,938
6,042 612 - 465 - 3,912 5,883 9,640 26,554 153,492
2020
2019
2020
Rs ’000
Rs’000 1,417,905
Rs ’000
1,005,966
-
1,773,772
1,988,594 69,661 27,005 38,689
83,747
144,726
10,057
31,801
8,498
69,405
1,449
2,019,704
2,123,949
103,751
200,309
557,856 342,828 219,454 162,689 100,068 47,660 48,976 448,387
5,289
268,769
404
215,668
-
98,646
413
64,929
-
75,943
52,586
21,386
4,532
408,106
23,721
1,353,756
1,927,918
86,945
4,379,426
5,469,772
190,696
(c) Analysis of expenses by nature: Direct costs
Wages and salaries
Social security costs
Pension costs
Other post-retirement benefits Employee benefits
Rental and lease expenses Logistics and utilities
Marketing expenses
Repairs and maintenance Management fees and services Office expenses
Travelling expenses
Others miscellaneous costs Other expenses Operating expenses
(d) Reorganisation costs relate mainly to voluntary early retirement costs of employees for the year ended 30 June 2020.
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


27. OPERATING EXPENSES (CONT’D)
(e) Write off of project costs relates to a preliminary costs incurred on the development of the Group’s site which was not materialised and was written off.
28. OTHER INCOME
Proceed from insurance claims Foreign exchange gains Government support, net of taxes Other revenue from COVID-19 Other income
THE GROUP
THE COMPANY
2020
2019
2020
Rs ’000
Rs’000 13,560 101,700 - - -
Rs ’000
-
-
140,879
112,646
174,896
958
31,461
-
3,459
-
350,695
115,260
113,604
2019 Rs’000 - 87,757 - - - 87,757
29. IMPAIRMENT OF NON-FINANCIAL ASSETS
(a) THE GROUP - 2020
During the year, the Group impaired non-financial assets by Rs 759.6m as a consequence of the downward medium-term trading expectations due to the current economic environment which has been exacerbated by the global COVID-19 pandemic.
Management has used judgements in its assumptions based on unprecedented set of circumstances from the COVID-19. These judgements are based on current market conditions as at date. The future impact of the pandemic are still uncertain and may further impact on the projection.
Impairment on non-financial assets
Impairment charges:
- Property, plant and equipment - Operating equipment
- Property, plant and equipment - Inventories
* Above impairment charges exclude the taxation impact
(i) Kanuhura
Cash generating unit/ Company
Kanuhura Resort Kanuhura Resort Ambre Resort Ltd Retail operations
Reportable segment
Maldives Maldives Mauritius Mauritius
Statements of Profit or loss
Rs ’000
627,149
15,433
92,797
24,252
759,631
The recoverable amount has been determined by calculating the value in use using a discounted cash flow model (“DCF”). The value in use calculation was determined based on the discounted cash flow model which resulted in an enterprise value of USD 46.7m (Rs 2,263m). Based on this assessment, impairment losses allocated to property, plant and equipment and operating equipment were USD 15.7m (Rs 627.1m) and USD 0.4m (Rs 15.4m) respectively.
In order to reflect the cash flow impact of the collapse in demand caused by the COVID-19 pandemic, management assumed the following:
• the expected future net cash flows for five years have been discounted and added to the discounted estimated terminal value.
• A 31% reduction in revenue for the financial year 2021. Cash flow projections for the financial year 2022 reflect an ADR growth of 8% with an occupancy
of 52%.
• Management assumed that in financial year 2022 the resort will be trading at similar occupancy levels achieved in the financial year 2019. The annual
growth rate applied to the cash flow forecasts for the 2023 to 2025 financial years ranged between 3% and 8%.
• The weighted average cost of capital (“WACC”) utilised in the valuation was 10%.
• The terminal growth rate applied is 3% for the Mauritian and Maldivian properties.
151
ANNUAL REPORT 2020 - SUN LIMITED


152
Cash generating unit
Kanuhura:
Impairment on property, plant and equipment Impairment on leasehold rights and land prepayments Impairment of goodwill
Long Beach Resort Ltd:
Impairment on property, plant and equipment
Loisirs des Iles Ltée:
Impairment on property, plant and equipment
Analysed as follows:
Impairment of goodwill and other non-financial assets
Impairment of property, plant and equipment
Total impairment
* Above impairment charges and reversal of revaluation surplus exclude the taxation impact
Reportable segment
Maldives
Mauritius Mauritius
Statements Statements of of Profit comprehensive or loss income
Rs’000 Rs’000
73,600 210,759 41,249 - 1,732,532 - 1,847,381 210,759
37,107 137,519
- 44,960
1,884,488 - - 393,238 1,884,488 393,238
Total impairment Rs ’000
284,359 41,249 1,732,532 2,058,140
174,626
44,960
1,884,488 393,238 2,277,726
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
29. IMPAIRMENT OF NON-FINANCIAL ASSETS (CONT’D)
(a) THE GROUP - 2020 (CONT’D) (ii) Ambre Resort Ltd
During the year ended 30 June 2020, the assets of Ambre Resort Ltd was impaired by Rs 92.8m primarily due to downward projections of the resort’s profitability over the remaining years of the lease. The value in use calculation was determined based on the discounted cash flow model which resulted in an enterprise value of Rs 140m at 30 June 2020.
The Group used a number of assumptions and judgements in determining the value in use of Ambre’s operation, as follows:
• the expected future net cash flows for the remaining years of the lease have been discounted and added to the discounted estimated terminal value.
• management has assumed a 53% reduction in operating revenue for the financial year 2021 as compared to a normal activity level. For financial year
2022, a growth of 10% has been considered as compared to preceeding year.
• an occupancy rate of 40% has been considered in financial year 2021 to reach an average of 54% by financial year 2023.
• The expected opening of the resort is assumed to be in the second half of the financial year 2021.
(iii) Retail operations
An impairment of inventories of Rs 24.3m was accounted to write down the inventories to net realisable value following the suspension of operations resulting in a slow movement of inventories due to the COVID-19 pandemic.
(b) THE GROUP - 2019
At 30 June 2019, management assessed the recoverable amount of the Cash Generating Units (“CGUs”) for which indicators of impairment exist, or to which goodwill has been allocated. The net impairment losses recognised are as follows:
In determining the impairment of the carrying amount of assets for each cash generating unit (CGU), a value in use calculation was carried out. (i) Kanuhura
During the financial year ended 30 June 2019, the goodwill and assets in relation to the Group’s operations in Kanuhura were impaired primarily due to revised projections of the resort over the next five years with the increasing supply of rooms in the Maldives industry, leading to intense competition. The value in use calculation was determined based on the discounted cash flow model which resulted in an enterprise value of USD 70.3m. Based on this assessment, impairment losses allocated to goodwill and property, plant and equipment were USD 48.7m (Rs 1,733m) and USD 9.6m (Rs 325.6m) respectively.
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


29. IMPAIRMENT OF NON-FINANCIAL ASSETS (CONT’D)
(b) THE GROUP - 2019 (CONT’D) (i) Kanuhura
The Group has used a number of assumptions and judgements in determining the value in use of the Maldives operations, as follows:
• the expected future net cash flows for five years have been discounted and added to the discounted estimated terminal value.
• the pre-tax adjusted discount rate used in the most recent value in use in the year ended 30 June 2019 calculation was 13.9% which was based on the
specific circumstances of the CGU.
• the terminal value has been computed by capitalising the net income prevailing at the end of the cash flow projections, using a perpetual growth rate
of 3%.
• the ADR is expected to grow at a compounded annual growth rate (CAGR) of 3% per annum from USD 721 in financial year 2020.
• an occupancy rate of 60% has been considered in financial year 2020 to reach 75% by financial year 2024.
• these forecasts are based on past experience adjusted to incorporate the expected share of the tourists arrivals and room price increases.
(ii) Long Beach Resort Ltd
During the year ended 30 June 2019, the assets of Long Beach was impaired by Rs 174.6m primarily due to revised projections of the resort over the next five years under the current challenging conditions of the industry. The value in use calculation was determined based on the discounted cash flow model which resulted in an enterprise value of Rs 2,398m at 30 June 2019.
The Group used a number of assumptions and judgements in determining the value in use of the Long Beach’s operation, as follows: • the expected future net cash flows for five years have been discounted and added to the discounted estimated terminal value.
• the pre-tax adjusted discount rate used in the most recent value in use in the year ended 30 June 2019 calculation was 11.8% which was based on the
specific circumstances of the CGU.
• the terminal value has been computed by capitalising the net income prevailing at the end of the cash flow projections, using a perpetual growth rate
of 3%.
• the ADR is expected to grow at a compounded annual growth rate (CAGR) of 3.3% per annum from Rs 4,861 in financial year 2020.
• an occupancy rate of 81% has been considered in financial year 2020 to reach 83% by financial year 2024.
• these forecasts are based on past experience adjusted to incorporate the expected share of the tourists arrivals and room price increases.
(iii) Loisirs des Iles Ltée
Management’s approach for impairment assessment was to state the assets at their fair value less cost to dispose which was higher than value in use.
The fair value was determined based on a valuation conducted by Broll Indian Ocean Limited, Chartered Valuer, in 2018 (Fair Value Hierarchy level 2). Management has considered a discount of 7% on the fair value of buildings to cater for registration duties and other selling costs. Based on this assessment, the fair value less cost to dispose was Rs 911m, which resulted in an impairment charge of Rs 44.96m on the buildings.
30. FINANCE COSTS
Finance costs on: Cash flow hedges Loans
Bank overdrafts Swap
Bonds
Lease liabilities Others
Foreign exchange losses
THE GROUP
153
2019 Rs’000
-
41,607 5,131 (4,751) 266,390 - - 308,377 - 308,377
THE COMPANY
2020
2019
2020
Rs ’000
Rs’000
-
160,652 7,981 - 266,391 19,743 -
Rs ’000
368,929
-
127,978
31,705
3,767
2,146
-
-
289,002
272,393
168,553
13,847
7,942
3,872
966,171
454,767 -
323,963
125,400
308,367
1,091,571
454,767
632,330
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
31. FINANCE INCOME
Interest received on:
- Bank deposits
- Current accounts with subsidaries
32. EARNINGS PER SHARE
Basic and diluted earnings per share
Loss attributable to equity holders of the Company Weighted average number of ordinary shares (thousand) Basic and diluted loss per share (Rs)
THE GROUP
THE COMPANY
2019 Rs’000
168 139,375 139,543
THE GROUP
2019 Rs’000 (1,885,048) 174,427 (10.81)
2020
2019
2020
Rs ’000
Rs’000
18,392 -
Rs ’000
21,250
10,701
-
136,600
21,250
18,392
147,301
2020
Rs ’000
(1,789,421)
174,427
(10.26)
Basic and diluted earnings per share is calculated by dividing profit/(loss) for the year attributable to ordinary equity owners of the Company by the number of shares in issue excluding treasury shares. After the reporting period, no ordinary shares (2019: nil ordinary shares) have been issued for cash; however, the earnings per share amount was not adjusted for such transaction occurring after the reporting period because such transactions do not affect the amount of capital used to produce profit or loss for the period.
33. CASH FLOW INFORMATION
(i) Movement in working capital
Inventories
Trade and other receivables Trade and other payables Contract liabilities Movement in working capital
(ii) Cash and cash equivalents
THE GROUP
THE COMPANY
2019 Rs’000 - 1,697,460 (2,108,679) - (411,219)
2020
2019
2020
Rs ’000
Rs’000 7,429 10,740 125,721 1,562
Rs ’000
10,607
-
(151,573)
(488,499)
192,688
870,110
(4,659)
-
47,063
145,452
381,611
154
Cash and cash equivalents at the end of the financial year as shown in the statements of cash flows can be reconciled to the related items in the statements of financial position as follows:
THE GROUP
THE COMPANY
2020
2019
2020
Rs ’000
Rs’000 627,661 (51,892)
Rs ’000
632,445
83,052
(45,404)
(2,122)
587,041
575,769
80,930
Cash and short-term deposits Bank overdrafts (note 19)
2019 Rs’000 41,083 (46,978) (5,895)
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


33. CASH FLOW INFORMATION (CONT’D)
(iii) Net debt reconciliation THE GROUP
Net debt as at 01 July 2018
Cash inflows
Acquisition through business combination Acquisitions under finance lease Amortised cost on borrowings
Other non cash movement
Foreign exchange adjustments
Net debt as at 30 June 2019
- Effect of adoption of IFRS 16
Net debt as at 01 July 2019
Cash inflows/(outflows) Amortised cost on borrowings Other non cash movement Foreign exchange adjustments
Net debt as at 30 June 2020 THE COMPANY
Net debt as at 01 July 2018
Cash inflows/(outflows) Amortised cost on borrowings Other non-cash movements Foreign exchange adjustments
Net debt as at 30 June 2019
- Effect of adoption of IFRS 16
Net debt as at 01 July 2019
Cash inflows
Amortised cost on borrowings Other non-cash movements Foreign exchange adjustments
Net debt as at 30 June 2020
Other assets
Cash/Bank overdraft Rs ’000 411,000 164,769 - - - - -
575,769
-
575,769
11,272 - - -
Other assets
Cash/Bank overdraft Rs ’000
37,739 (43,634) - - -
(5,895)
-
(5,895)
86,825 - - -
Liabilities from financing activities
Loans and other borrowings Rs ’000 (8,620,440) 213,778 (2,176) - 8,501 (17,000) 16,365
(8,400,972)
-
(8,400,972)
(313,364) (10,620) 11,251 (651,741)
Leases liabilities Rs ’000 (411,639) 3,609 - (2,522) - - -
(410,552)
(2,091,254)
(2,501,806)
187,754 - (75,149) (42,979)
Total Rs ’000 (8,621,079) 382,156 (2,176) (2,522) 8,501 (17,000) 16,365
(8,235,755)
(2,091,254)
(10,327,009)
(114,338) (10,620) (63,898) (694,720)
587,041
(9,365,446)
(2,432,180)
(11,210,585)
Liabilities from financing activities
155
Loans and other borrowings Rs ’000
(6,086,039) (53,526) 8,501 (6,530) 9,532
(6,128,062)
-
(6,128,062)
465,954 (9,838) - (312,240)
Leases
liabilities Total
Rs ’000 Rs ’000
(170) (6,048,470) 170 (96,990) - 8,501 - (6,530) - 9,532
- (6,133,957)
(309,151) (309,151)
(309,151) (6,443,108)
- 552,779
- (9,838) 85,563 85,563 - (312,240)
80,930
(5,984,186)
(223,588)
(6,126,844)
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
34. COMMITMENTS
(a) Capital commitments
THE GROUP
THE COMPANY
2019 Rs’000
2020
2019
2020
Rs ’000
Rs’000 293,158
Rs ’000
160,000
-
Authorised and contracted for
The capital commitments relate to final phase renovation of Sugar Beach which will be completed in October 2020.
-
35. RELATED PARTY TRANSACTIONS
The transactions of the Group and the Company with related parties during the period are as follows:
(a) Sales of goods and services Subsidiaries and associates of parent Subsidiaries
(b) Interest income Subsidiaries
(c) Rental income Subsidiaries
(d) Dividend income Subsidiaries
(e) Purchases of goods and services Subsidiaries and associates of parent
(f) Administrative and secretarial service fees Subsidiaries and associates of parent
THE GROUP
THE COMPANY
2020
2019
2020
Rs ’000
Rs’000 30,507 -
Rs ’000
14,886
-
-
174,494
14,886
30,507
174,494
-
-
136,600
-
-
-
-
-
99,410
48,818
24,347
8,528
12,514
10,324
1,290
156
2019 Rs’000 - 71,163 71,163
139,375 - 763,500 4,862
3,707
(g) The Company has an agreement for the provision of advisory, legal, administrative and secretarial services by CIEL Corporate Services Ltd.
(h) Compensation
Key management personnel
- Short-term benefits
- Share based payments expense - Termination benefits
- Post-employment benefits
(i) Outstanding balances
Receivables from related parties: Non current Subsidiaries and associates of parent
Loan to subsidiaries
Finance lease receivables: Subsidiary company
THE GROUP
THE GROUP
THE COMPANY
2019 Rs’000 38,705 1,070 4,520 3,604 47,899
THE COMPANY
2019 Rs’000
-
2,230,000 2,230,000
-
2020
2019
2020
Rs ’000
Rs’000 60,675 2,000 4,520 5,223
Rs ’000
39,396
26,781
-
-
-
-
5,243
3,934
44,639
72,418
30,715
2020
2019
2020
Rs ’000
Rs’000
2,015 -
Rs ’000
2,015
-
-
1,720,000
2,015
2,015
1,720,000
-
-
97,140
- Loans to related parties are unsecured, with no fixed terms of repayment and carries interest at 6.25% (2019: 6.25%) per annum.
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


35. RELATED PARTY TRANSACTIONS (CONT’D)
(i) Outstanding balances (Cont’d)
Receivables from related parties - Current Subsidiaries and associates of parent Subsidiaries
THE GROUP
THE COMPANY
2019 Rs’000
-
1,743,269 1,743,269
2020
2019
2020
Rs ’000
Rs’000
485 -
Rs ’000
71,082
1,302
-
1,673,199
71,082
485
1,674,501
- The current amounts receivable from related parties are unsecured, interest free and will be settled in cash. No guarantees have been given or received. No expense has been recognised as loss allowance in respect of amounts owed by related parties (current).
Provisions for impairment of receivables from related parties
Payables to related parties - current Holding company
Subsidiaries and associates of parent Subsidiaries
The above transactions have been made in the normal course of business.
-
250,838
THE COMPANY
2019 Rs’000
-
-
897,417 897,417
157
-
759,746
THE GROUP
2020
2019
2020
Rs ’000
Rs’000
184 3,003 -
Rs ’000
-
-
23,400
7,909
-
1,702,841
23,400
3,187
1,710,750
The amounts payable to related parties are unsecured, interest free and will be settled in cash.
(j) Loans and interest receivable from key management personnel under the Phantom Share Option Scheme
Refer to note 14(a)
(k) Pension contributions to pension plan
Please refer to note 21.
36. CONTINGENT LIABILITIES
Bank guarantees were given to Anahita Hotel Ltd on behalf of Sun Limited with respect to long-term debts contracted by the latter arising in the ordinary course of business from which it is anticipated that no material losses will arise.
Except than those disclose above, the Group had no other contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business as at 30 June 2020.
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
37. FINANCIAL INSTRUMENTS
37.1 Capital management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of interest-bearing loans and borrowings net of cash and cash equivalents and equity attributable to equity owners of the parent, comprising retained earnings, stated capital and reserves as disclosed in notes 17 and 18 respectively.
Gearing ratio
The Group has a target gearing ratio up to a maximum of 50% determined as the proportion of net debt to capital employed. Exceptionally in this financial year, the significant impact of COVID-19 has resulted in a gearing above the Group’s target. Management is looking at various options to ensure that in the medium term, the gearing ratio is brought back within the target figure.
The gearing ratio at the year end was as follows:
Debt (Note (i))
Cash and cash equivalents
Net debt
Capital employed ((Note (ii))
Net debt to capital employed ratio
Net debt excluding IFRS 16 Leases to capital employed ratio
(i) Debt is defined as loans, leases, debentures and overdrafts.
(ii) Capital employed includes all capital, reserves and the net debt of the Group.
There were no changes in the Group’s approach to capital risk management during the year.
Significant accounting policies
THE GROUP
THE COMPANY
2019 Rs’000 6,175,040 (41,083) 6,133,957 19,444,685 31.5% 31.5%
2020
2019
2020
Rs ’000
Rs’000 8,863,416 (627,661)
Rs ’000
11,843,030
6,209,896
(632,445)
(83,052)
11,210,585
8,235,755
6,126,844
17,240,503
16,685,036
17,174,941
65.0%
49.4%
35.7%
59.3%
48.1%
34.8%
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements.
37.2 Categories of financial instruments
Financial assets Amortised Cost
Cash and short term deposits Trade and other receivables Other financial assets
Assets at Fair Value Through other Comprehensive Income
Other investments Interest in subsidiaries
Financial liabilities Amortised Cost
Loans and other borrowings Lease liabilities
Trade and other payables
Financial assets and liabilities exclude prepayments and accruals.
37.3 Financial risk management
THE GROUP
THE COMPANY
2020
2019
2020
Rs ’000
Rs’000
627,661 568,523 18,935
Rs ’000
632,445
83,052
574,981
1,694,718
18,935
1,834,060
1,226,361
1,215,119
3,611,830
164,170 -
158,900
5,550
-
14,966,975
158,900
164,170
14,972,525
8,452,864 410,552 1,183,345
9,410,850
5,986,308
2,432,180
223,588
1,587,284
1,919,939
13,430,314
10,046,761
8,129,835
158
2019
Rs’000
41,083 1,750,781 2,246,920 4,038,784
5,550 15,564,331 15,569,881
6,175,040 - 944,130 7,119,170
The Group’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group. These risks include market risk (including currency risk, fair value interest risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
37.4 Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. Financial market risk is defined as the risk that business performance is affected by movements in financial market prices or rates. Financial market risk may therefore result in a profit or loss and is the risk that derivatives are usually designed to manage.
The Group enters into a variety of forwards contracts, swaps and cap to manage its exposure to interest rate and foreign currency risk. Details of contracts outstanding at the end of the reporting period are given in note 22.
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


37. FINANCIAL INSTRUMENTS (CONT’D)
37.5 Foreign currency risk management
The Group has financial assets and financial liabilities denominated in various foreign currencies. Consequently, the Group is exposed to the risk that the carrying amounts of these foreign currency denominated assets and liabilities may change due to fluctuations in foreign exchange rates.
The currency profile of the financial assets and financial liabilities, excluding equity investments in subsidiaries and associates and employee benefit liability at 30 June 2020 and 30 June 2019, are as follows:
THE GROUP
THE COMPANY
Financial assets
Financial liabilities
Financial assets
Financial liabilities
Rs ’000
Rs ’000
Rs ’000
Rs ’000
78,702
1,024,236
693,505
234,588
260,018
5,710,093
41,572
3,109,083
136,139
142,067
71
-
128,713
148,385
2,715
1,117
810
13
221
13
604,382
7,024,794
738,084
3,344,801
621,979
6,405,520
2,947,255
4,785,034
1,226,361
13,430,314
3,685,339
8,129,835
2020
US Dollar
Euro
South African Rand UK Pound
Others
Total foreign currencies Mauritian Rupee
Total
2019
US Dollar
Euro 347,615 South African Rand 184,862 UK Pound 133,398 Others 14,922
Total foreign currencies 773,932 Mauritian Rupee 441,187 Total 1,215,119
788,957 7,676,374 181,428 152,774 22,931
8,822,464
1,224,297 10,046,761
1,148,991 27,748 109 257 309
1,177,414 2,861,370 4,038,784
212,821 6,154,277 2 6,239 -
6,373,339 745,831 7,119,170
93,135
159
The Group is mainly exposed to fluctuations in US Dollar, Euro, South African Rand and UK Pound exchange rates.
The following table details the Group’s sensitivity to a 1% increase and/or decrease in the Mauritian Rupee against the relevant foreign currencies.
THE GROUP
2019 Profit or loss
Rs’000
US Dollar (6,958) Euro (73,288) South African Rand 34 UK Pound (194) Others (80)
THE COMPANY
2019 Profit or loss
Rs’000
US Dollar 9,362 Euro (61,265) South African Rand 1 UK Pound (60)
The above is mainly attributable to:
(i) the exposure outstanding on receivables and deposits in above currencies; and
(ii) differences on translation of receivables and payables in foreign subsidiaries.
Other equity Rs’000
(6,297) (45,094) 6 (1,191) -
Other equity Rs’000
-
-
-
-
2020
Profit or loss
Other equity
Rs ’000
Rs ’000
(9,455)
959
(54,501)
(642)
(59)
(24)
(197)
(27)
8
-
2020
Profit or loss
Other equity
Rs ’000
Rs ’000
4,589
-
(30,675)
-
1
-
16
-
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
37. FINANCIAL INSTRUMENTS (CONT’D)
37.6 Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrows funds at floating interest rates. The Group’s policy is to minimise exposure to interest rate movements without exposing the Group to speculation or undue risk. Sun Limited manages its exposure to fluctuations in interest rates with a view to containing its net interest costs or securing its interest revenues through the purchase of certain hedging instruments such as interest rate caps, floors, swaps or forward rate agreements.
The current policy is to have a good mix of fixed versus variable interest rate with fixed being at least 50% of the interest rate.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section. The interest rate profile of the Group at the end of the reporting period were as follows:
Financial assets
2020
%
3.00 - 7.53
0.25
South African Rand Mauritian Rupee
Financial liabilities
2020
Mauritian Rupee US Dollar
Euro
GBP
2019
Mauritian Rupee
US Dollar
Euro 3.25 GBP N/A
Interest rate sensitivity analysis
Balances with banks Interest rate
2019 %
3.00 - 7.53 1.90
Loans
Lease Liabilities
Bank overdrafts
Bonds
Fixed interest rate %
Floating interest rate %
3.25 - 5.75 4.37 - 7.33 2.15 - 3.88
511.00
Fixed interest rate %
6.25 N/A 5.00 N/A
Floating interest rate %
N/A N/A N/A N/A
Fixed interest rate %
N/A N/A N/A N/A
Floating interest rate %
5.75 - 6.00 6.87 N/A N/A
Fixed interest rate %
6.00 - 6.5 N/A 4.5 N/A
Floating interest rate %
4.80 - 5.20 N/A 4 N/A
1.50
4.10
5.06 - 7.83
N/A
N/A
4.10 - 4.80
6.00 - 6.50
3.15 - 3.55
N/A
2.37 - 5.36
11.00
N/A
N/A
4.66
N/A
N/A
N/A
1.82 - 3.93
5.00
N/A
N/A
N/A
1.70 - 4.50
3.50 - 4.00
N/A
4.54
N/A
N/A
N/A
N/A
N/A
N/A
160
N/A N/A
The sensitivity analysis below have been determined based on the exposure to interest rates for both financial assets and liabilities at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was for the whole year. A 1% increase or decrease is used and represents management’s assessment of the likely change in interest rate.
If interest rates had been 1% higher/lower and all other variables were held constant:
Profit or loss Other equity
THE GROUP
THE COMPANY
2019 Rs’000
(19,993) -
2020
2019
2020
Rs ’000
Rs’000
(42,723) -
Rs ’000
(48,643)
(22,605)
-
-
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


37. FINANCIAL INSTRUMENTS (CONT’D)
37.7 Other price risks
The Group and the Company are exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Group and the Company do not actively trade into these investments.
Equity price sensitivity analysis
If equity prices had been 1% higher/lower:
•Profit for the year ended 2020 and 2019 would have been unaffected as the equity investments are classified at fair value through other comprehensive income.
•Other equity reserves would increase/decrease by Rs 1.59m (2019: Rs 1.64m) for the Group and Rs 0.06m (2019: Rs 0.06m) for the Company respectively as a result of the changes in equity investments classified at fair value through other comprehensive income.
The Group’s sensitivity to equity prices has not changed significantly from the prior year.
37.8 Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group’s funding and liquidity management requirements. Following the COVID-19 pandemic, the liquidity of the Group is impacted as it is influenced by the booking pattern of customers which saw a decline. Further details are disclosed in note 3.
Sun Limited shall ensure that it has adequate though not excessive cash resources, borrowing arrangements, overdraft facilities to enable it at all times to have the level of funds available which are necessary for the achievement of its business objectives based on the measures put in place as disclosed in note 3. Cash and debt management is centralised through corporate finance and receipts from the centralised debtors’ collection department are monitored on a monthly basis to match the payments of creditors and other commitments. Any temporary gap in cash is covered by the overdraft and short-term borrowing facilities in place.
Liquidity and interest risk tables
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.
Non derivative financial instruments
Weighted average effective interest rate
%
2020
Non-interest bearing
Variable interest rate
instruments 3.7% - Fixed interest rate
instruments 4.8% - 7.05%
2019
Non-interest bearing
Variable interest rate
instruments 4.5% - Fixed interest rate
instruments 4.8% - 5.63% -
-
At call Rs ’000
77,720
-
1-5 years Rs ’000
72,092 2,807,890 4,102,148
-
4,119,157
3,815,808 7,934,965
5+ years Rs ’000
-
425,021 6,126,116
-
393,951
985,235 1,379,186
Total Rs ’000
1,587,284 4,864,270 12,383,866
1,157,474
5,614,623
5,048,619 11,820,716
THE GROUP
1-3 months
Rs ’000 659,265 192,698
14,786
578,737 520,982
17,262
1,116,981
3 months to 1 year
Rs ’000 778,207 1,438,661 2,140,816
578,737 580,533 230,314
1,389,584
161
77,720
866,749
4,357,684
6,982,130
6,551,137
18,835,420
-
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
37. FINANCIAL INSTRUMENTS (CONT’D)
37.8
Liquidity risk management (Cont’d)
Non derivative financial instruments
2020
THE COMPANY
Weighted average effective interest rate
%
At call Rs ’000
7,895
-
-
-
-
1-3 months Rs ’000
25,046 154,397 -
23,357 487,087
11,232 521,676
3 months to 1 year Rs ’000
112,060 1,007,581 1,830,260
23,357
184,280
212,223 419,860
1-5 years Rs ’000
72,092 1,076,195 2,437,539
-
2,238,885
3,721,535 5,960,420
5+ years Rs ’000
-
22,288 -
-
101,909
Total Rs ’000
217,093 2,260,461 4,267,799
46,714 3,012,161
Non-interest bearing
Variable interest rate
instruments 3.5% - Fixed interest rate
instruments 5.5% -
7,895
179,443
2,949,901
3,585,826
22,288
6,745,353
2019
Non-interest bearing
Variable interest rate
instruments 4.6% Fixed interest rate
instruments 4.8%
Credit risk management
- 3,944,990 101,909 7,003,865
162
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and to the Company. The Group and the Company have adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group and the Company only transact with entities of good credit rating. This information is supplied by independent rating agencies where available and, if not available, the Group uses other publicly available financial information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored.
The Group does not have any significant credit risk exposure to any single counterparty.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.
37.9
37.10 Fair value of financial instruments
Except where stated elsewhere, the carrying amounts of the Group’s and the Company’s financial assets and financial liabilities approximate their fair values due to the short-term nature of the balances involved.
The fair values of financial assets and financial liabilities are determined as follows:
• the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with
reference to quoted market prices; and
• the fair value of other financial assets and financial liabilities (excluding derivative instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


37. FINANCIAL INSTRUMENTS (CONT’D)
37.10 Fair value of financial instruments (Cont’d)
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3 fair value measurements are those derived from valuation techniques that includes inputs for the assets or liability that are not based on observation market data (unobservable inputs).
FVTPL financial assets:
Listed equities
2020
THE GROUP AND THE COMPANY
Level 1 Level 2 Level 3 Rs’000 Rs’000 Rs’000
Total Rs’000
3
-
-
3
2019 3--3 The table above only includes financial assets.
38. DERIVATIVE FINANCIAL INSTRUMENTS DESIGNATED AS HEDGING INSTRUMENTS
The Group is exposed to foreign currency risk, most significantly to the Euro, Pound Sterling and US Dollar, on the Group’s sales denominated in these currencies. The Group hedges these exposures by entering into foreign currency loans (“hedging instruments”) with future principal payments that will match the future sales (“hedged item”) in these currencies. All exchange differences arising on the conversion of foreign currency loans are deferred in equity, under the cash flow hedge reserve to the extent that the hedge is effective. On recognition of the hedged sales, the foreign currency gain/loss is netted off by releasing a portion of the cash flow hedge reserve.
As a result of the uncertainty in expected foreign currency revenue resulting from the COVID-19 pandemic and the related suspension of its operations, the Group has reviewed the hedging portfolio to confirm whether the underlying transactions remain “highly probable”.
At the time of reporting, management has identified:
(i) a portion of foreign currency sales which are no longer deemed to be “highly probable” but are still expected to occur. Hence, the corresponding
cumulative gain or loss deferred in equity whilst the hedge was effective remains in equity until the forecasted transaction occurs.
(i) A portion of foreign currency sales which are no longer deemed to be “highly probable” and are not expected to occur. Hence, the corresponding cumulative gain or loss deferred in equity whilst the hedge was effective are immediately removed from equity and are recognised in the statement of profit or loss.
163
(a) The Group’s cash flow hedge reserve disclosed in the consolidated statement of changes in equity relates to the following:
At 01 July
Revaluation (loss)/gain on loan recognised in other comprehensive income
Cash flow hedge reserve released to P&L on repayment of loan included in finance cost Ineffective portion of cash hedge reserve
At 30 June
THE GROUP
2019 Rs’000 (83,727) 12,369 5,947 - (65,411)
2020
Rs ’000
(65,411)
(447,000)
26,718
342,210
(143,483)
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
38. DERIVATIVE FINANCIAL INSTRUMENTS DESIGNATED AS HEDGING INSTRUMENTS (CONT’D)
(b) Below is a schedule indicating the periods when the hedge cash flows are expected to occur and when they are expected to affect profit or loss:
THE GROUP
2020 Within
1 year
Rs ’000 Rs ’000
Cash inflows - 1,002,307 Cash outflows (3,055,407) (1,002,307) Net cash outflows
3 to 5 years
Rs ’000
879,809 (879,809)
3 to 5 years
Rs ’000
2,450,235 (2,450,235) -
More than 5 years
Rs ’000
4,668,871 (4,668,871)
More than 5 years
Rs ’000
1,359,893 (1,359,893)
-
1 to 3 years
(3,055,407)
-
-
-
2019 Within 1 year
1 to 3 years
Rs ’000
4,723,371 (4,723,371) -
Cash inflows Cash outflows Net cash outflows
(c) The hedge of the variability of cash flows due to exchange rate fluctuations
Rs ’000
971,102 (971,102) -
164
The foreign exchange loss on translation of the borrowings was recognised in other comprehensive income during the year:
The final repayment of the bank borrowings and bonds identified as the hedge instrument range from 31 December 2025 to 31 December 2029 for the Group and range from 31 December 2021 to 30 September 2025 for the Company.
2020
2019
2020
Rs ’000
Rs’000 8,782
Rs ’000
153,646
-
Foreign exchange loss
The fair value of the denominated bank loans and bonds is as follows:
As at 30 June
These financial assets are classified under Level 3 of the Fair Value Hierarchy.
THE GROUP
THE GROUP
THE COMPANY
2019 Rs’000
-
THE COMPANY
2019 Rs’000
6,128,062
2020
2019
2020
Rs ’000
Rs’000 8,400,972
Rs ’000
7,002,947
3,621,687
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


39. SEGMENT INFORMATION
For management purposes, the Group is organised into business units based on its services and has two reportable segments, as follows: - Hotel operations which relate to operating and/or managing six resorts in Mauritius and one in Maldives
- Others which relates to hospitality management services
2020
Rs ’000
4,434,530
422,808
200,339
5,057,677
(972,141)
(836,172)
5,419
(1,802,894)
4,857,338
143,164
5,000,502
200,339
(143,164)
5,057,677
(1,808,313)
5,419
(1,802,894)
631,508
113,046
744,554
2,051
746,605
1,003,243
86,597
1,731
1,091,571
13,644
7,606
21,250
GEOGRAPHICAL
Geographical revenue: Mauritius
Maldives
Others
Total revenue
Geographical results: Mauritius
Maldives
Others
Loss for the year
Segment revenue:
Hotel operations - External sales Hotel operations - Inter-segment sales
Others - External sales Elimination of inter-segment sales Total revenue
Segment results: Hotel operations Others
Loss for the year
Depreciation and amortisation
Mauritius Maldives
Hotel operations Others
Finance costs
Mauritius Maldives
Others
Hotels operations
Finance income
Mauritius Others
THE GROUP
2019
Rs’000
5,682,111 519,200 413,573
6,614,884
(1,557,288) (343,325) 15,012 (1,885,601)
6,201,311 284,378 6,485,689 413,573 (284,378) 6,614,884
(1,900,613) 15,012 (1,885,601)
478,219 86,485 564,704 3,794 568,498
410,714 44,053 - 454,767
10,064 8,328 18,392
165
ANNUAL REPORT 2020 - SUN LIMITED


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
39. SEGMENT INFORMATION (CONT’D)
Rs ’000 Mauritius (25,034)
Maldives (10,880)
Hotels operations (35,914) Others (2,477) (38,391)
Assets
Non-current
Mauritius 16,877,466 Maldives 2,402,768
Hotel operations 19,280,234 Others 4,353
THE GROUP
2020
2019 Rs’000
96,340 100,474
196,814 4,724 201,538
15,663,118 2,510,300
18,173,418 5,725
18,179,143
702,445 43,796 18,925,384
1,234,882 92,588
1,327,470 198,611 1,526,081
8,884,412 417,890 9,302,302
2,248,957 222,884
2,471,841 228,042 2,699,883
381,351 19,213
400,564 1,249 401,813
702,445 43,796
Income tax (charge) /credit
Unallocated:
Interest in associates Interest in joint venture
19,284,587
495,991 51,103 19,831,681
166
Current
Mauritius 1,222,157 Maldives 106,621
Hotel operations 1,328,778 Others 160,417 1,489,195
Liabilities
Non-current
Mauritius 9,450,066 Maldives 793,179 Hotel operations 10,243,245
Current
Mauritius 4,630,406 Maldives 239,711
Hotel operations 4,870,117 Others 177,596 5,047,713
Additions to non-current assets
Mauritius 403,687 Maldives -
Hotel operations 403,687 Others 9,903 413,590
Investment in associates
Mauritius 495,991
Investment in joint venture
France 51,103
OVERVIEW / THE YEAR IN REVIEW / GOVERNANCE / FINANCIAL STATEMENTS


40. DIVIDENDS PER SHARE
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the dividends are declared.
2020
Rs ’000
-
Amount recognised as distributions to equity holders in the year:
Final dividend payable for year ended 30 June 2020 of Nil cents per share (2019: 75 cents per share)
41. EVENTS AFTER THE REPORTING PERIOD
THE GROUP AND THE COMPANY
2019 Rs’000
130,820
On 06 October 2020, the Group signed a binding term sheet with the Mauritius Investment Co Ltd, a subsidiary of the Bank of Mauritius, to subscribe to Rs 3.1 billion of redeamable convertible secured bonds in two of its wholly owned subsidiaries, Anahita Hotel Ltd and Long Beach Resort Ltd. These funds were made available by the Authorities to support the hotel industry which has been heavily impacted by the COVID-19 pandemic and will enable the Group to meet its financial commitments and working capital in the foreseeable future. On 04 November 2020, the Company repaid its existing bonds falling due within one year of EUR 54 million after having finalised a refinancing plan with its bankers and the MIC support. Furthermore, the Prime Minister announced in September 2020, the partial reopening of the borders on 01 October 2020 for commercial activities with very restrictive health and sanitary protocols for all tourists and incoming passengers. Thus, the Group expects to start reopening gradually its resorts in Mauritius from October 2020 depending on the forward bookings and pick up trends observed.
42. PARENT AND ULTIMATE COMPANY
The company considers CIEL Limited, a company incorporated in Mauritius, as its parent and ultimate parent company.
167
ANNUAL REPORT 2020 - SUN LIMITED






Sun Limited
Ebène Skies, Rue de l’Institut Ebène, Mauritius
T: +230 402 0000 E: [email protected]
BRN: C06003886
SUNRESORTSHOTELS.COM